Zack Hutchins
Director of Communications

For Release — December 6, 1999

Survey: NYS employers want lawmakers to enact policies that will help
contain health-care costs

Employers fear that, left unchecked, rising costs will both change health benefits and increase health costs borne directly by workers

ALBANY— New York's business community overwhelming believes that New York should enact policies designed to rein in skyrocketing costs of health care and health insurance, and to bring New York's health costs more in line with the rest of the nation's, a new Business Council survey shows.

Respondents to The Business Council's survey of its members also warned that rising costs of health care in New York, if left unchecked, will inevitably lead to increases in health-care costs that are paid directly by workers who receive health insurance as an employee benefit.

"Business thinks New York's health-care costs are dangerously swollen, and they're recommending a cold compress of common sense," said Daniel B. Walsh, president/CEO of The Business Council. "Our health-care spending is far out of line with other states', which undermines our competitiveness. It's time to treat the problem."

The survey asked Council members about the quality, recruitment value, and costs of health insurance benefits they offer. It also asked how unchecked increases in health-care costs might affect the benefit offered and the extent of employees' contributions toward those costs.

The survey also solicited opinions on four specific issues of importance in New York State: Medicaid cost containment; New York's one-of-a-kind taxes on health care created by the Health Care Reform Act of 1996 (HCRA); the likely effect of "HMO liability" legislation on health costs; and the effect of health-care mandates on health costs.

There were 456 responses to the survey of Business Council members, which was conducted in November. Key findings of the survey include the following:

Good health-insurance benefits remain critical to recruiting employees. Most respondents agreed that a good health insurance benefit is either very important (83.3%) or somewhat important (15.4%) to attracting and retaining good employees. Most respondents also said that their health-insurance benefits are either excellent (49.8%) or good (39.5%).

Unchecked cost increases may change the nature of health benefits offered and is very likely to affect how much employees pay for that benefit. Four out of five respondents predicted that employees' share of health insurance costs will increase significantly (82.7%). Asked to select any or all of four possible employee cost increases that they considered likely, respondents predicted increased deductibles (predicted by 65.8%); increased co-pays for physicians' visits (72.1%); increased insurance premiums (83.8%); and increased co-pays for prescription drugs (76.5%). In fact, more than half of respondents (50.7%) said that employees are likely to face all four of these possible cost increases.

Nearly three in 10 respondents (28.9%) predicted that unchecked cost increases would produce a fundamental change in the nature of employees' health insurance benefits. These respondents said their firm would likely replace traditional health-care benefits with a "defined benefit," under which employees would select their own coverage and pay the difference between the defined benefit and actual costs (with a greater share of costs and cost increases borne by employees).

Businesses strongly support Medicaid cost containment. Most respondents either strongly agreed (51.1%) or agreed (37.3%) that New York should bring its Medicaid costs more in line with the national average. Respondents also said that Medicaid cost containment would enhance New York's competitiveness and job growth (42.3% strongly agreed, 39.0% agreed.)

New York's Medicaid costs per capita are well over twice the national average, 50 percent worse than the next most costly state and nearly as high as costs in Texas and California combined. If New York's Medicaid costs were reduced only enough to put New York at twice the national average, taxpayers would still save $2.7 billion a year.

Businesses wants New York's unique HCRA taxes on health care to expire. Three out of four respondents either strongly agreed (31.6%) or agreed (43.0%) that New York should eliminate its tax on health care and support hospitals' needs for physician training, bad debt, and charity care as 48 other states do: by incorporating support for those priorities into health insurance rates negotiated in the marketplace. About the same number also either strongly agreed (28.9%) or agreed (49.3%) that extending or expanding these taxes would likely increase employees' health-care costs.

New York's Health Care Reform Act of 1996 deregulated hospitals and created $2.7 billion in taxes, mostly on employers, to subsidize hospitals for physician training, bad debt, and charity care. Other states support these priorities, but none with such a tax. The tax, New York's second-largest business tax, is due to expire this month.

Businesses predict further increases in costs if lawmakers act to encourage new lawsuits against insurers. Nearly nine of 10 respondents strongly agreed (45.8%) or agreed (41.7%) that health-care costs would increase if lawmakers enacted "HMO liability," a proposal to permit new lawsuits against HMOs, health-care insurers, and self-insuring employers over disputes involving health-care coverage. Most respondents also strongly agreed (42.3%) or agreed (43.9%) that HMO liability would drive up health-care costs borne directly by employees.

Businesses fear that new health insurance "mandates" will further increase health-care costs. More than 95 percent of respondents strongly agreed (53.3%) or agreed (39.7%) that laws requiring health insurance to pay for specific treatments, such as a proposed mandate covering infertility treatments, will increase health-care costs. Nine of 10 respondents strongly agreed (49.3%) or agreed (41.9%) that new mandates would drive up health-care costs borne by directly employees.